10 regulatory challenges that shaped discretionaries' 2012

Regulation has dominated the headlines over the past year and here we take a look at the 10 stories that have proved pivotal for the wealth management sector.

10 regulatory challenges that shaped discretionaries' 2012

13 Dec, 2012

The FSA’s 166-rule costing discretionaries millions

The Financial Services Authority (FSA) has used its powers 114 times to order ‘skilled person’ reports over the past year alone, sparking concerns it may be outsourcing its risk assessment function and burdening wealth managers with unnecessary costs.

The average cost of commissioning a report under Section 166 of the FSMA is £292,736, but the most expensive was estimated at £2 million, according to documents obtained by Wealth Manager under the Freedom of Information Act.

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FSA bans payments from discretionaries to advisers

The Financial Services Authority is proposing to change adviser charging rules so firms do not receive kick-backs from discretionary investment managers in exchange for recommending their services.

Under the retail distribution review (RDR), advisory firms should only be paid for the personal recommendations they provide to their clients, through the charge they have agreed with their client. They should not be remunerated by discretionary investment managers.

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VAT ruling leaves discretionary 20% pricier than MPS

Advisers opting for a discretionary service when outsourcing assets will have to charge their clients a 20% premium versus equivalent multi-manager or managed portfolio services, following a VAT ruling.

The preliminary judgement, delivered to the European Court of Justice (ECJ) ahead of a forthcoming final decision by the court itself, means adviser charging for discretionary services post-retail distribution review will be subject to VAT.

Leave a comment!

FSA finalises guidance on independence

The FSA has stuck to its guns with the inclusion of life products in its definition of retail investment products, which will mean a proportion of private client investment management companies will be unable to take on the 'independent' label post-retail distribution review.

Leave a comment!

FSA loophole allows firms to accept trail for a year after RDR

A loophole in the retail distribution review will allow execution-only and discount broker firms to continue to take trail commission for up to a year after the new regulatory regime has come into force.

In a blow to smaller firms that get the bulk of their business from third parties, the loophole in the new rules states that execution-only and discount brokers will still be able to take trail if they buy directly from fund groups.

Leave a comment!

How Brewin Dolphin is planning for Fatca

The US Foreign Account Tax Compliance Act (Fatca) regulation has been dubbed more significant than the UK’s retail distribution review, which wealth managers have been preparing for since 2006.

Although discretionaries and fund managers alike are still getting to grips with the impending changes, many expect Fatca’s introduction in 2014 to usher in a new era that obliges UK fund groups and distributors to identify their US investors and report the details to the US Internal Revenue Service.

Leave a comment!

FSA writes to 24 CEOs warning on dodging adviser charging rules

The Financial Services Authority has written to the chief executives of two dozen product provider and advisory firms to outline its concerns that firms may be looking to 'work around' adviser charging rules.

Firms could be dodging these by soliciting or providing payments or benefits, the FSA said.

Leave a comment!

FSA warns on show-horning clients into once-size models

Centralised investment propositions (CIP) may pose a risk that customers are ‘shoe-horned’ into a one-size-fits-all process, the Financial Services Authority has said.

In its Assessing Suitability: Replacement Business and Centralised Investment Propositions report, the regulator said it had looked at the increasing array of CIPs which wealth managers had put in place as a response to the upcoming retail distribution review.

Leave a comment!

FSA grants 18 waivers ahead of RDR cliff edge

The Financial Services Authority has granted 18 waivers in relation to the January 2013 deadline for the retail distribution review's professionalism requirements.

The City watchdog said it had extended the deadline for 18 firms out of a possible 47 applications for waivers. Its admission was included in correspondence between Treasury Committee chair Andrew Tyrie and managing director of the FSA Martin Wheatley, in which Tyrie repeated his calls for the FSA to reconsider allowing a 12 month delay in the RDR's implementation.

Leave a comment!

The FSA’s 166-rule costing discretionaries millions

The Financial Services Authority (FSA) has used its powers 114 times to order ‘skilled person’ reports over the past year alone, sparking concerns it may be outsourcing its risk assessment function and burdening wealth managers with unnecessary costs.

The average cost of commissioning a report under Section 166 of the FSMA is £292,736, but the most expensive was estimated at £2 million, according to documents obtained by Wealth Manager under the Freedom of Information Act.

Leave a comment!

The FSA’s 166-rule costing discretionaries millions

The Financial Services Authority (FSA) has used its powers 114 times to order ‘skilled person’ reports over the past year alone, sparking concerns it may be outsourcing its risk assessment function and burdening wealth managers with unnecessary costs.

The average cost of commissioning a report under Section 166 of the FSMA is £292,736, but the most expensive was estimated at £2 million, according to documents obtained by Wealth Manager under the Freedom of Information Act.

Leave a comment!

FSA bans payments from discretionaries to advisers

The Financial Services Authority is proposing to change adviser charging rules so firms do not receive kick-backs from discretionary investment managers in exchange for recommending their services.

Under the retail distribution review (RDR), advisory firms should only be paid for the personal recommendations they provide to their clients, through the charge they have agreed with their client. They should not be remunerated by discretionary investment managers.

Leave a comment!

VAT ruling leaves discretionary 20% pricier than MPS

Advisers opting for a discretionary service when outsourcing assets will have to charge their clients a 20% premium versus equivalent multi-manager or managed portfolio services, following a VAT ruling.

The preliminary judgement, delivered to the European Court of Justice (ECJ) ahead of a forthcoming final decision by the court itself, means adviser charging for discretionary services post-retail distribution review will be subject to VAT.

Leave a comment!

FSA finalises guidance on independence

The FSA has stuck to its guns with the inclusion of life products in its definition of retail investment products, which will mean a proportion of private client investment management companies will be unable to take on the 'independent' label post-retail distribution review.

Leave a comment!

FSA loophole allows firms to accept trail for a year after RDR

A loophole in the retail distribution review will allow execution-only and discount broker firms to continue to take trail commission for up to a year after the new regulatory regime has come into force.

In a blow to smaller firms that get the bulk of their business from third parties, the loophole in the new rules states that execution-only and discount brokers will still be able to take trail if they buy directly from fund groups.

Leave a comment!

How Brewin Dolphin is planning for Fatca

The US Foreign Account Tax Compliance Act (Fatca) regulation has been dubbed more significant than the UK’s retail distribution review, which wealth managers have been preparing for since 2006.

Although discretionaries and fund managers alike are still getting to grips with the impending changes, many expect Fatca’s introduction in 2014 to usher in a new era that obliges UK fund groups and distributors to identify their US investors and report the details to the US Internal Revenue Service.

Leave a comment!

FSA writes to 24 CEOs warning on dodging adviser charging rules

The Financial Services Authority has written to the chief executives of two dozen product provider and advisory firms to outline its concerns that firms may be looking to 'work around' adviser charging rules.

Firms could be dodging these by soliciting or providing payments or benefits, the FSA said.

Leave a comment!

FSA warns on show-horning clients into once-size models

Centralised investment propositions (CIP) may pose a risk that customers are ‘shoe-horned’ into a one-size-fits-all process, the Financial Services Authority has said.

In its Assessing Suitability: Replacement Business and Centralised Investment Propositions report, the regulator said it had looked at the increasing array of CIPs which wealth managers had put in place as a response to the upcoming retail distribution review.

Leave a comment!

FSA grants 18 waivers ahead of RDR cliff edge

The Financial Services Authority has granted 18 waivers in relation to the January 2013 deadline for the retail distribution review's professionalism requirements.

The City watchdog said it had extended the deadline for 18 firms out of a possible 47 applications for waivers. Its admission was included in correspondence between Treasury Committee chair Andrew Tyrie and managing director of the FSA Martin Wheatley, in which Tyrie repeated his calls for the FSA to reconsider allowing a 12 month delay in the RDR's implementation.

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